Rental property damage: Landlords liable - court rules

[wodger]

In case my key point has been lost in my choice of words, it's this:
Whether the insurance company recovers part or all of the claim value it's a sure bet they have calculated (at renewal time) to make a profit on the deal.

Case in point. I have 'full' car insurance. This costs $215.05 per year (I had the policy sitting on my shelf right next to me so it was easy to find the number). This was set entirely on questions they asked me. Say I was to move to Auckland, I expect the premium would at least double. Again, the cost was set relative to the policy holder.

Sure, I understand that example. But how do they make a profit at claim time?

That house might have cost $1500 to insure. They paid out $212k when it got burned down. Because they can't get that money back from the tenant aren't they now down by about $212k? Even if they could claim back the $212k how can they make a profit from it by anything more than the original $1500 paid by the owner when he bought the cover?

[PTWhatAGreatForum]

Even if they could claim back the $212k how can they make a profit from it by anything more than the original $1500 paid by the owner when he bought the cover?

They can't recover it because the tenant doesn't have the money.

All that happens is they go through the cynical and pointless motions to appear "tough" and to try and sell more insurance. Tenant ends up bankrupt and insurance company receives nothing - which was what they were expecting (ie: budgeting on) all the way along.

The Court of Appeal has made the appropriate decision and I can't see why landlords are worried about it because it doesn't affect them one iota. The scourge of meth is a far greater legitimate concern.

[wodger]

They can't recover it because the tenant doesn't have the money. All that happens is they go through the cynical and pointless motions to appear "tough" and to try and sell more insurance. Tenant ends up bankrupt and insurance company receives nothing.

OK yeah, I'm seeing your point, the punishment wouldn't really fit the "crime".

The Court of Appeal has made the appropriate decision and I can't see why landlords are worried about it because it doesn't affect them one iota.

As above, I'm seeing your point. This was a great outcome for the landlord at the end of the day, and it's why we buy insurance. I wasn't worried about it, just interested and decided to comment here.

The scourge of meth is a far greater legitimate concern.

Ugh, totally agree. This makes me sick. My cousin got a test done on a whim and narrowly avoided buying an ex meth lab as their first house. (That's a guess, it may well have just been home to some meth users, rather than being a lab).

I'm considering getting a baseline test done in both my rentals and testing as each tenant leaves. Just using self test kits at this stage. Hopefully the first one is clear! It's on my PMs agenda currently, so waiting to hear what they think too.

[wodger]

This is it. Worth a skim read...

Holler & Rouse v Osaki & Anor

https://www.courtsofnz.govt.nz/cases/holler-rouse-v-osaki-anor/at_download/fileDecision

[Monsterbishi]

Wow, not much wiggle room on that judgement.

I can see this being an excuse for some to shuffle the rents up.

[PTWhatAGreatForum]

This is it. Worth a skim read...

Holler & Rouse v Osaki & Anor
https://www.courtsofnz.govt.nz/cases...d/fileDecision

That was interesting and it reminds me of a few years ago getting a quote on P/L insurance in respect of a commercial lease in a multi tenant building. The insurance broker never advised me it wasn't needed....

I was willing to sign a lease for some space in 2014 but the leasor wouldn't accept no PG. So I declined. Same thought there - the lease wasn't much but I figured no PG was also a liability protection....

[cube]

They can't recover it because the tenant doesn't have the money.

All that happens is they go through the cynical and pointless motions to appear "tough" and to try and sell more insurance. Tenant ends up bankrupt and insurance company receives nothing - which was what they were expecting (ie: budgeting on) all the way along.

The Court of Appeal has made the appropriate decision and I can't see why landlords are worried about it because it doesn't affect them one iota. The scourge of meth is a far greater legitimate concern.

Disagree - it will affect landlords because the insurance premiums will go up. Insurers have set their premiums on the assumption that some % of the losses can be recovered from the tenant or the tenant's insurer. If that avenue is closed, premiums have to rise to cover the shortfall.

[PTWhatAGreatForum]

Disagree - it will affect landlords because the insurance premiums will go up. Insurers have set their premiums on the assumption that some % of the losses can be recovered from the tenant or the tenant's insurer. If that avenue is closed, premiums have to rise to cover the shortfall.

I expect the amount of real recovery is not much and will be less in the instance of a tenant having insurance because tenant's liability insurance is not available on it's own - it's only available with contents insurance. Therefore, any claim which gives rise to paying the landlord (or their insurer) will very likely have already exceeded the tenant's premium before getting to that point - just paying for the tenant's "stuff".

In isolation it may look good to get recovery from another company but there is only a few companies in NZ. What if both parties are insured with the same company?

Unless someone from the insurance industry can explain in a direct manner (ie: no weasel words or avoidance) why my analysis is incorrect, I think it's a sure bet the insurance companies aren't basing their bottom line on recoveries.

[cube]

From the recommended skim read it looks like unintended consequences.

The RTA was supposed to supercede the PLA, but didn't provide enough provision for recourse in the light of significant economic damage (other than eviction), therefore the court took guidance from the PLA to reach its conclusion.

One thing I note is the the PLA states that the tenant isn't liable if the landlord is insured, but the question posed is

Whether residential tenants are immune from a claim by the landlord
where the rental property suffers loss or damage caused intentionally or
carelessly by the tenant or the tenant’s guests?

If the tenant intentionally causes damage, is the landlord insured? (Keys example of setting up homes for (not so) retired pyromaniacs comes to mind)

[Ivan McIntosh]

I struggle to understand how that ruling was put in place. Does that mean if someone hit my car 'accidentally' and my insurance company goes after them then there is a chance if the case goes to court the judge will rule those who 'accidentally' hit my car not to be responsible to pay my insurance company for the damages?

I'm having a very hard time understanding the logic behind this ruling.

That's not really apples with apples.

The idea is to give some relief where the tenant is, either arguably (with a gross rent) or explicitly, paying the insurance premiums. It has been accepted by the government that it is a bit on the nose for the insurer to then sue the person effectively paying the premiums. The person who hits your car is in no way paying your premiums, so bit of a different story. This has been in place since 2008 or so, but has only now seen a case in the residential sphere.

Have a read of http://www.legislation.govt.nz/act/p...DLM969481.html

The gist of it is below...

269 Exoneration of lessee if lessor is insured

(1) If this section applies, the lessor must not require the lessee—

(a) to meet the cost of making good the destruction or damage; or

(b) to indemnify the lessor against the cost of making good the destruction or damage; or

(c) to pay damages in respect of the destruction or damage.

(2) If this section applies, the lessor must indemnify the lessee against the cost of carrying out any works to make good the destruction or damage if the lessee is obliged by the terms of any agreement to carry out those works.

(3) Subsection (1) does not excuse the lessee from any liability to which the lessee would otherwise be subject, and the lessor does not have to indemnify the lessee under subsection (2), if, and to the extent that,—

(a) the destruction or damage was intentionally done or caused by the lessee or the lessee’s agent; or

(b) the destruction or damage was the result of an act or omission by the lessee or the lessee’s agent that—

(i) occurred on or about the leased premises or on or about the whole or any part of the land on which the premises are situated; and

(ii) constitutes an imprisonable offence; or

(c) any insurance moneys that would otherwise have been payable to the lessor for the destruction or damage are irrecoverable because of an act or omission of the lessee or the lessee’s agent.

[Perry]

'Bad' tenants let off the hook for damage after court ruling
27 April 2016

Bad tenants are being unfairly let off the hook for property damage after a court decision, landlords say. Landlords and property managers say that while last week's appeal court decision may have been fair, the ruling opens the floodgates for tenants being excused for severe negligence and deliberate damage.One Christchurch property manager, who did not want his business identified for fear of jeopardising live Tenancy Tribunal claims, said they had lost two applications in the last few days seeking orders for tenants to pay landlords' insurance excesses after damage. "The Tenancy Tribunal said they had made their ruling because of the Appeal Court ruling. They definitely used that as an excuse to exonerate tenants for any damage costs," the property manager said.

New Zealand Property Investors Federation president Andrew King said they were very concerned at the lack of legal clarity and were setting up meetings with the Insurance Council and also the Ministry of Justice, which runs the Tenancy Tribunal. "We'll be looking closely at how the Tenancy Tribunal reacts to this (court decision), and we'll be having discussions with them to try and come to a better arrangement. There's now a real grey area between what's malicious and what's accidental," said King. "If tenants are not held responsible for anything, that takes away that duty of care."

[Keys]

A game changer for landlords out there

This is going to cause problems.

[Bobsyouruncle]

Unbelievable, completely ridiculous.

[Don't believe the Hype]

Additional risk for the landlord will result in additional cost for all tenants. This ruling provides cover for those who choose to do the wrong thing creating additional costs for all tenants

[Anthonyacat]

Where's the copy and paste love, Keys? Some of us are on terrible connections in cheap Spanish hostels and have to wait five full minutes to find out what's so game changing!

For anyone else in that situation, it's a link to a tenancy ruling that confirms insurance excesses are not recoverable from the tenant when they carelessly damage your property. This makes me really angry. Is anyone overseeing these judgements for reasonableness?

Now, putting my yellow hat on (or is it green?) - wouldn't it be an option for me to go to my insurer, and ask them to remove cover for careless damage by tenants? Perhaps the ideal situation would be to negotiate a level of cover so that major careless damage is covered, but minor stuff isn't. Then, not an insured event therefore the cost on the tenant. Yes?